On December 8, 2016, four major retailers were accused of unfair competition and false advertising under California law. According to complaints filed by the City of Los Angeles in California state court, J.C. Penney, Kohl’s, Macy’s and Sears have each misrepresented the regular retail price of thousands of goods in an effort to make consumers believe the items are available at steeper discounts than actually being offered.
The complaints allege that the companies engage in a practice called “false reference pricing” whereby retailers misrepresent the original or regular price of an item in order to make the “sale” price look like a better deal that it actually is. Under California law, retailers are not permitted to advertise an alleged former price of an item unless the alleged former price was the prevailing market price within three months of the advertisement, or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement. The City of Los Angeles seeks relief in the form of $2,500 fines for each violation of the unfair competition law and the false advertising law, with additional $2,500 fines for every violation which harmed senior citizens or disabled people – conservatively, the retailers each face potential fines of over $2.5 million if Los Angeles can prove its case.
As we previously reported, retailers should consider how to minimize the risk, such as avoiding price comparisons altogether on labels.